Chinese ecommerce group, Alibaba, will launch an online video service, Tmall Box Office (TBO), in late summer 2015. The company hopes to develop the Chinese equivalent of HBO and Netflix with 90 per cent of content paid for, either by a subscription or on a PPV basis. Pricing and content deals were not revealed. However, Alibaba claims that the platform will stream international and local movies and TV series as well as some original content.
The TBO service will be available through Alibaba’s set-top box and selected smart TVs that support its operating system including Chinese TV manufactures TLC, Hisense and Haier.
Founded in 1999, the Alibaba Group operates a diverse portfolio of services. These include the online marketplaces (Taobao), mobile payments service (Alipay), as well as a cloud computing platform (Aliyun.com,) and investments in many other leading Chinese tech companies. In its most recent financial results (FY2015) the company generated revenue of $12.3 billion an impressive growth rate of 45% compared to 2014.
Alibaba is not new to online video, as the company is acquiring an 16.5% holding in Youku Tudou, a video streaming company and has also partnered with the Lionsgate Entertainment Group. However, the launch of TBO is in stark contrast to the online video landscape in China in that it will have the majority of its content behind a payment wall. With the Chinese online video space dominated by advertising supported content, either for legal FTV content, UGC (user generated content) and pirated streams, Alibaba will face a significant challenge to make Chinese consumers pay for the service.
The online video market in China is extremely fragmented, with both local and international content available for free. However, TBO’s competitors such as iQiyi, Youku Tudou, Sohu and LeTV are increasingly experimenting with paid-for business models as the market matures and thus TBO will benefit from the market’s attempt to educate consumers into paying for content. The use of original productions will also give TBO an advantage over its competitors due to the exclusivity of these shows and the decreased risk of piracy pre-releasing the content to the online black market. IHS expects that TBO will also use HD/UHD as a differentiator between its paid service and the content on its sister site Youku Tudou in an attempt to convince consumers to subscribe or rent the content rather than watch for free.
The Chinese market with its large population and number of internet users presents a significant growth market for online video companies. IHS forecasts that broadband penetration in China will be 42.7% in 2015 significantly lower than Western markets. However, this growth opportunity is also attractive to international companies, with Netflix reported to be considering entering the market led by its in-house produced content.